Bank of England Madness

[El Cid]

Even so, I don't want to live in a country where the state owns all the land in perpetuity. I'm comfortable that the tax payer should invest to get projects started but then the state needs to take a step back.

 

I dont have a problem in principle, of selling off land and assets, when we are in a pickle. Will Osborne be remembered for selling off the most, like Brown is remembered for selling off the Gold?

Most of our land is undeveloped, more should be given to councils and housing associations. We havnt build enough social housing for decades.

[mafya]

Can someone explain why it's OK to print 'phoney money'and give it to the banks, but not OK to print 'phoney money' and use it for the benefit of the people?

 

Don't worry, helicopter money may be on its way= http://uk.businessinsider.com/morgan-stanley-on-the-impact-of-brexit-and-the-introduction-of-helicopter-money-2016-6

 

https://next.ft.com/content/a36c5a26-5997-11e6-9f70-badea1b336d4

 

https://www.theguardian.com/commentisfree/2016/aug/05/recession-bank-england-money-uk-households

[Anna B]

Do you understand how fiat currency works?

 

Yes I think so. But I don't see how that answers my question.

[mossdog]

Yes I think so. But I don't see how that answers my question.

...........here's information on the subject....

 

...There’s nothing much I can say that hasn’t already been said about the Bank of England’s decision to cut the bank rate to a 322-year low of 0.25%. The £70 billion stimulus package and the other measures won’t – in my view – do much to stimulate the demand for credit. They will, however, make life even more miserable for British savers and investors.

 

It doesn’t look like Carney is much concerned with British pensioners. Despite the stockmarket signals – the stockmarket being a leading indicator of the economy – Carney and his colleagues have hit the panic button. They believe early surveys of business and consumer sentiment signal a tough time ahead for the UK economy. Not wanting to appear timid or weak, he’s gone big and bold.

 

Good for him. But to close a week in which we’ve talked about the death of money as we know it and a final assault on your freedom of action with money, let’s go back to David Fischer and The Great Wave. In a section called “Learning to think of the long run,” Fischer writes:

 

We should learn to think historically about our condition. History is not only about the past. It is also about change and continuity. Most of all it is about the long run. The two leading errors of economic planning are to impose short-term thinking on long-term problems and, and to adopt atemporal and anachronistic policies which do not recognise that the world has changed. It is an axiom of military history that generals are trained to fight the last war. In economic history, planners and managers are taught to prevent the last crisis from happening again. The next one is always different.

 

Henry Hazlitt makes the same point in his classic book Economics in One Lesson. Policy makers always respond to what is seen. And they judge the success of a policy on short-term effects. What is unseen – and here Hazlitt and Fischer are both borrowing from Frédéric Bastiat – is always left out of the calculation.

 

What is unseen to Mark Carney is what will happen to millions of British savers and pensioners who will not earn money on their retirement pot now. Instead, in real terms, they’ll see it dwindle in purchasing power and even nominally. All of the virtues of saving and delaying consumption won’t have counted for anything.

 

Sacrifices must be made in war, of course. In the war on deflation, low interest rates may punish savers. But they are good for borrowers. If it just so happens that governments and large financial firms are the biggest borrowers in the world, well then so be it. Sacrifices must be made.

 

But as Tim Price has suggested, you can make sense of the present through the lens of the past. Carney, Kuroda and Yellen are fighting the spectre of deflation from the 1930s. But that deflation was due to a collapse in banks, which led to a collapse in credit and the money supply.

 

Today’s deflation is driven by demography, technology, and globalisation. They are fighting the wrong war with a weapon that doesn’t work. That’s why I’m increasingly convinced they’ll switch targets. Instead of targeting banks (who create credit) with lower rates, they’ll target you. Why?

 

You’re the one who spends money. You’re the one who can increase demand by borrowing and spending more. You’re the one hoarding cash. You’re the one holding back GDP. You’re the one causing problems. And the problem is you keep planning for the future and living for today.

 

I’m not sure how it will end. But the trend isn’t encouraging. If you want people to live faster and spend more, maybe you have to let money die. And if money won’t die, maybe you have to kill it.

 

 

How You End up With a Fake Economy

 

 

AUGUST 4, 2016

 

BILL BONNER, CHAIRMAN, BONNER & PARTNERS

 

OUZILLY, France *– Poor Christine!

 

The IMF director and Parasitocrate Haute Gamme Ms. Lagarde recently learned that she must stand trial for corruption charges in France.

 

It concerns a complicated deal that went down while she was finance minister of France. Not worth trying to understand in detail…

 

But poor Christine – who did part of her schooling in the heart of the Deep State, in Bethesda, Maryland – will have to defend herself.

 

Here Is the Enemy

 

And now emerges a report from the IMF’s own Independent Evaluation Office that says the organization misled its own board of directors, failed to “grasp an elemental concept of currency theory,” and generally made a mess of things. In dealing with the Greek crisis, particularly, the IMF was incompetent and ineffective, says the report.

 

In this too, it is easy to get lost in the woods. And getting lost is what we are trying to avoid.

 

We are explaining our money system to our grandson, James, now 14 months old…

 

His mother tries to get him to go to bed at 9 p.m. But the little boy’s internal clock is still on Baltimore time; it tells him it is much too early to go to sleep.

 

Grandpa takes over, drawing out the monetary system like a general spreading a map on a field table. “Here is the enemy,” he says gravely. “They have us completely surrounded. We’re doomed.”

 

James grumbles. He squirms. He has a sunny, optimistic temperament. But we think our explanations are sinking in.

 

He seems to understand…

 

…that money is not wealth; it just measures and represents wealth, like the claim ticket on a car in a parking garage.

 

…that our post-1971 money system is based on fake money that represents no wealth and measures badly.

 

…that this new money enters the economy as credit… and that the credit industry (Wall Street) has privileged access to it. The working man still has to earn his money, selling his work, by the hour. But Wall Street – and elite borrowers connected to the Establishment – get it without breaking a sweat or watching the clock.

 

…that a disproportionate share of this new money is concentrated in and around the credit industry – pushing up asset prices, raising salaries and bonuses in the financial sector, and making the rich (those who own financial assets) much richer.

 

…that this flood of credit helped the middle class raise its living standards, even as earnings stagnated. But it also raised debt levels throughout the economy.

 

…and that it allowed the average American family to spend American money that Americans never earned and buy products Americans never made… Instead, Walmart’s shelves were stocked with goods “Made in China.” The middle class lost income as factories, jobs, and earnings moved overseas. Debt stayed at home.

 

“Okay so far?” we asked James as his eyeballs rolled backwards and his breathing slowed.

 

But one thing must still puzzle him. How did the new dollar actually retard growth?

 

Maybe it didn’t make people richer… after all, how can you expect to make people better off by giving them fake money?

 

But how did it make them worse off?

 

----------

 

The Ultimate Absurdity

 

We began with an attack en masse across a broad, philosophical front:

 

“As you sow, so shall ye reap,” we said. “And when you put a lot of fake money into a society, you end up with a fake economy.”

 

Just look at Argentina in 2001… or Zimbabwe in 2006… or Venezuela now…

 

Prices go wild as people try to figure out what the money is really worth. But the economy shrinks.

 

It was the same way in Germany during the Weimar hyperinflation. People stopped producing. You might have a billion marks in your pocket, but you couldn’t find a bar of soap for sale.

 

“But wait… I know what you’re thinking…” we imagined James pushing back. “Those are all hyperinflation stories. We don’t have that now. Instead, we have much less inflation… prices are almost stable.”

 

“Yes… for now. The inflation is in the asset sector… and in credit itself… not in consumer items. But the phenomenon is much the same.

 

“Fake money is giving grossly distorted information to everyone. In Manhattan, we are told that an ordinary apartment is worth $2 million. But in Geneva – where interest rates have turned negative – we are told that $2 million is worth nothing… you will have to pay one of the banks to take it off your hands.

 

“Without honest money, real savings, and true interest rates, businesses and investors have nothing to guide them. They are lost in the woods. Few want to do the hard work, and take the risks, of long-term, capital-heavy ventures. Instead, the focus shifts to speculation, gambling… and playing the game for short-term profits.

 

What’s more, artificially low interest rates provide fatal misinformation. They tell the world that we have an infinite supply of resources – time, money, energy, and know-how.

 

Then, without its back to the wall of scarcity, with no need to make careful choices, capitalism becomes reckless and irresponsible with its most valuable resource – capital itself. It is destroyed, wasted, misallocated, and malinvested. Growth rates fall and the world becomes poorer.

 

And now, in Japan, there is talk of the ultimate absurdity… Look carefully, because we believe this straw may have “final” etched on it in tiny letters.

 

Japan is said to be considering a perpetual bond issued at negative interest rates.

 

“How does that work?” we can hear James asking.

 

“Well, it’s very simple. You give your money to the government. And then you pay the government every year, forever, for taking it from you.”

 

James is startled awake. He is disturbed.

 

“What kind of a world have I been born into…?” he seems to ask.

 

Regards,

 

Bill Bonner

Bill Bonner

 

 

Capital and Conflict is published by MoneyWeek Research.

[spilldig]

And what do you imagine would be the result of such a law?

 

Do you think highstreet banks would offer interest bearing savings accounts? Or would they simply close them?

 

---------- Post added 05-08-2016 at 14:47 ----------

 

 

Do you understand how fiat currency works?

 

---------- Post added 05-08-2016 at 14:48 ----------

 

 

I'm capable of withdrawing it on the same day it's deposited.

 

Banks got along quite happily for years paying around 5%.

[Anna B]

Sure, but as you have demonstrated in the past you are so blinkered when it comes to economics (as illustrated in this thread as well as many others) that no matter how well it is explained you will ignore it anyway.

 

Why not just admit you don't know...

 

---------- Post added 05-08-2016 at 18:58 ----------

 

...........here's information on the subject....

 

...There’s nothing much I can say that hasn’t already been said about the Bank of England’s decision to cut the bank rate to a 322-year low of 0.25%. The £70 billion stimulus package and the other measures won’t – in my view – do much to stimulate the demand for credit. They will, however, make life even more miserable for British savers and investors.

 

It doesn’t look like Carney is much concerned with British pensioners. Despite the stockmarket signals – the stockmarket being a leading indicator of the economy – Carney and his colleagues have hit the panic button. They believe early surveys of business and consumer sentiment signal a tough time ahead for the UK economy. Not wanting to appear timid or weak, he’s gone big and bold.

 

Good for him. But to close a week in which we’ve talked about the death of money as we know it and a final assault on your freedom of action with money, let’s go back to David Fischer and The Great Wave. In a section called “Learning to think of the long run,” Fischer writes:

 

We should learn to think historically about our condition. History is not only about the past. It is also about change and continuity. Most of all it is about the long run. The two leading errors of economic planning are to impose short-term thinking on long-term problems and, and to adopt atemporal and anachronistic policies which do not recognise that the world has changed. It is an axiom of military history that generals are trained to fight the last war. In economic history, planners and managers are taught to prevent the last crisis from happening again. The next one is always different.

 

Henry Hazlitt makes the same point in his classic book Economics in One Lesson. Policy makers always respond to what is seen. And they judge the success of a policy on short-term effects. What is unseen – and here Hazlitt and Fischer are both borrowing from Frédéric Bastiat – is always left out of the calculation.

 

What is unseen to Mark Carney is what will happen to millions of British savers and pensioners who will not earn money on their retirement pot now. Instead, in real terms, they’ll see it dwindle in purchasing power and even nominally. All of the virtues of saving and delaying consumption won’t have counted for anything.

 

Sacrifices must be made in war, of course. In the war on deflation, low interest rates may punish savers. But they are good for borrowers. If it just so happens that governments and large financial firms are the biggest borrowers in the world, well then so be it. Sacrifices must be made.

 

But as Tim Price has suggested, you can make sense of the present through the lens of the past. Carney, Kuroda and Yellen are fighting the spectre of deflation from the 1930s. But that deflation was due to a collapse in banks, which led to a collapse in credit and the money supply.

 

Today’s deflation is driven by demography, technology, and globalisation. They are fighting the wrong war with a weapon that doesn’t work. That’s why I’m increasingly convinced they’ll switch targets. Instead of targeting banks (who create credit) with lower rates, they’ll target you. Why?

 

You’re the one who spends money. You’re the one who can increase demand by borrowing and spending more. You’re the one hoarding cash. You’re the one holding back GDP. You’re the one causing problems. And the problem is you keep planning for the future and living for today.

 

I’m not sure how it will end. But the trend isn’t encouraging. If you want people to live faster and spend more, maybe you have to let money die. And if money won’t die, maybe you have to kill it.

 

 

How You End up With a Fake Economy

 

 

AUGUST 4, 2016

 

BILL BONNER, CHAIRMAN, BONNER & PARTNERS

 

OUZILLY, France *– Poor Christine!

 

The IMF director and Parasitocrate Haute Gamme Ms. Lagarde recently learned that she must stand trial for corruption charges in France.

 

It concerns a complicated deal that went down while she was finance minister of France. Not worth trying to understand in detail…

 

But poor Christine – who did part of her schooling in the heart of the Deep State, in Bethesda, Maryland – will have to defend herself.

 

Here Is the Enemy

 

And now emerges a report from the IMF’s own Independent Evaluation Office that says the organization misled its own board of directors, failed to “grasp an elemental concept of currency theory,” and generally made a mess of things. In dealing with the Greek crisis, particularly, the IMF was incompetent and ineffective, says the report.

 

In this too, it is easy to get lost in the woods. And getting lost is what we are trying to avoid.

 

We are explaining our money system to our grandson, James, now 14 months old…

 

His mother tries to get him to go to bed at 9 p.m. But the little boy’s internal clock is still on Baltimore time; it tells him it is much too early to go to sleep.

 

Grandpa takes over, drawing out the monetary system like a general spreading a map on a field table. “Here is the enemy,” he says gravely. “They have us completely surrounded. We’re doomed.”

 

James grumbles. He squirms. He has a sunny, optimistic temperament. But we think our explanations are sinking in.

 

He seems to understand…

 

…that money is not wealth; it just measures and represents wealth, like the claim ticket on a car in a parking garage.

 

…that our post-1971 money system is based on fake money that represents no wealth and measures badly.

 

…that this new money enters the economy as credit… and that the credit industry (Wall Street) has privileged access to it. The working man still has to earn his money, selling his work, by the hour. But Wall Street – and elite borrowers connected to the Establishment – get it without breaking a sweat or watching the clock.

 

…that a disproportionate share of this new money is concentrated in and around the credit industry – pushing up asset prices, raising salaries and bonuses in the financial sector, and making the rich (those who own financial assets) much richer.

 

…that this flood of credit helped the middle class raise its living standards, even as earnings stagnated. But it also raised debt levels throughout the economy.

 

…and that it allowed the average American family to spend American money that Americans never earned and buy products Americans never made… Instead, Walmart’s shelves were stocked with goods “Made in China.” The middle class lost income as factories, jobs, and earnings moved overseas. Debt stayed at home.

 

“Okay so far?” we asked James as his eyeballs rolled backwards and his breathing slowed.

 

But one thing must still puzzle him. How did the new dollar actually retard growth?

 

Maybe it didn’t make people richer… after all, how can you expect to make people better off by giving them fake money?

 

But how did it make them worse off?

 

----------

 

The Ultimate Absurdity

 

We began with an attack en masse across a broad, philosophical front:

 

“As you sow, so shall ye reap,” we said. “And when you put a lot of fake money into a society, you end up with a fake economy.”

 

Just look at Argentina in 2001… or Zimbabwe in 2006… or Venezuela now…

 

Prices go wild as people try to figure out what the money is really worth. But the economy shrinks.

 

It was the same way in Germany during the Weimar hyperinflation. People stopped producing. You might have a billion marks in your pocket, but you couldn’t find a bar of soap for sale.

 

“But wait… I know what you’re thinking…” we imagined James pushing back. “Those are all hyperinflation stories. We don’t have that now. Instead, we have much less inflation… prices are almost stable.”

 

“Yes… for now. The inflation is in the asset sector… and in credit itself… not in consumer items. But the phenomenon is much the same.

 

“Fake money is giving grossly distorted information to everyone. In Manhattan, we are told that an ordinary apartment is worth $2 million. But in Geneva – where interest rates have turned negative – we are told that $2 million is worth nothing… you will have to pay one of the banks to take it off your hands.

 

“Without honest money, real savings, and true interest rates, businesses and investors have nothing to guide them. They are lost in the woods. Few want to do the hard work, and take the risks, of long-term, capital-heavy ventures. Instead, the focus shifts to speculation, gambling… and playing the game for short-term profits.

 

What’s more, artificially low interest rates provide fatal misinformation. They tell the world that we have an infinite supply of resources – time, money, energy, and know-how.

 

Then, without its back to the wall of scarcity, with no need to make careful choices, capitalism becomes reckless and irresponsible with its most valuable resource – capital itself. It is destroyed, wasted, misallocated, and malinvested. Growth rates fall and the world becomes poorer.

 

And now, in Japan, there is talk of the ultimate absurdity… Look carefully, because we believe this straw may have “final” etched on it in tiny letters.

 

Japan is said to be considering a perpetual bond issued at negative interest rates.

 

“How does that work?” we can hear James asking.

 

“Well, it’s very simple. You give your money to the government. And then you pay the government every year, forever, for taking it from you.”

 

James is startled awake. He is disturbed.

 

“What kind of a world have I been born into…?” he seems to ask.

 

Regards,

 

Bill Bonner

Bill Bonner

 

 

Capital and Conflict is published by MoneyWeek Research.

 

Thankyou very much Mossdog. That must have taken a lot of time and effort to research and write. Much appreciated.

[Norseman]

When was the last time it reduced the rate, must be 2010 or so? This could be in the consequence thread, cause and effect. But that would be gloom and doom mongering.

 

I think it was 2008 or the year before even, a great time to get a mortgage though regardless and certainly better than saving as there's no interest!

[ricgem2002]

I'm capable of withdrawing it on the same day it's deposited.

you didnt say that thou so i think your wrong again

[Beauchiefs]

In February 2013 "Mervyn King argued further QE was needed(UK) to prevent 'potentially lasting destruction of productive capacity and increases in unemployment'

 

But in Jan 2015 King said "We have had the biggest monetary stimulus that the world must have ever seen, and we still have not solved the problem of weak demand. The idea that monetary stimulus after six years ... is the answer doesn't seem (right) to me,"

 

This is a copy of letter Mervyn King sent me in 2009.

 

This is an example of the gobeldy gook that King has come up with over the years

His aide Roger Beaton forwarded it to me when I had queried low interest rates with the Bank of England stating I did not think they were helping. When I suggested they were doing no more than look in a crystal ball he did not reply

 

Extract from speech by Mervyn King to C.B.I. in Nottingham on 20 Jan 2009 dealing with inflation and economy.

 

In addition to these conventional unconventional measures there are also unconventional

unconventional measures. When credit markets are dysfunctional, as some are at present,

targeted purchases by the Bank of England of assets may improve liquidity in markets for

those credit instruments. The objective of such purchases would be not only to boost the

supply of broad money but also to increase liquidity and trading activity in the markets

for those assets. A reduction in the illiquidity premium for a particular credit instrument

might help to stimulate issuance by corporate borrowers and the resumption of capital

market flows, thus reducing reliance on bank lending. It could also raise the values of

assets that are currently under-priced because of high illiquidity premia, helping to

strengthen the balance sheets of banks and other financial institutions.

 

http://www.bankofengland.co.uk/publications/Documents/speeches/2009/speech372.pdf

THEY HAVN'T GOT A CLUE. CARNEY IS JUST REPEATING THE SAME CLAP TRAP.

[Cyclone]

you didnt say that thou so i think your wrong again

 

What are you talking about?

 

Nobody makes you KEEP your money in a bank account. You understand what KEEP means?

 

---------- Post added 06-08-2016 at 10:53 ----------

 

Banks got along quite happily for years paying around 5%.

 

Yes, when the base rate was at a similar level...

 

---------- Post added 06-08-2016 at 10:53 ----------

 

Yes I think so. But I don't see how that answers my question.

 

I'm not sure you do, if you think that new money is "phoney" but existing money is somehow legitimate.